The UK-based Lloyd's insurance market's gross loss relating to the September11 terrorist attacks on the US has been estimated at £5.4 billion (US$7.7 billion), net of inter-syndicate reinsurance, according to a 23 October announcement from ratings agency Standard & Poor's.

"The loss estimate for Lloyd's is based on information available to date, but considerable uncertainty over the ultimate size of the market's losses remains," commented Stephen Searby, a director of Standard & Poor's Financial Services Ratings which has currently placed Lloyd's rating on CreditWatch with negative implications.

Standard and Poor's says it recognises that measures introduced by US regulators will help ease the financial burden on Lloyd's members. Under current regulations, non-US domiciled reinsurers are required to lodge funds equivalent to 100 per cent of gross liabilities to US reinsureds in Credit for Reinsurance Trust Funds (CRTF).

The regulators have however agreed that the calculation of Lloyd's liabilities and transfer of funds will be reduced to 60 per cent for World Trade Centre-related claims until further notice. In addition, to further ease the funding burden, the regulators have agreed to accept insurance L/Cs as admissible CRTF assets.

Although Lloyd's liquidity will be under pressure in the medium-term, analysts expect that cash drawdowns for claims related to the September 11 attacks will ultimately be more than replenished by additional levies already announced.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.